Taxation (OPT)

Other Percentage Taxes Reviewer

Section 116 of OPT states that…

Any person whose sales or receipts are exempt under Section 109(CC) of the Tax Code, as amended, from the payment of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales

Section 109 (CC) pertains to…

Sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales do not exceed the amount of Three million pesos (P3,000,000.00)

OPT (3%) requisities

• Not a VAT registered person.

• Annual sales will not exceed the VAT threshold of P3,000,000

• Does not fall into any of the category of VAT exempt person under Section 109 A to BB.

• Not subject to other percentage taxes under Section 117 to 127

The following shall be exempt from paying the 3% percentage tax:

• Cooperatives

• Self-employed individuals and professionals availing the 8% tax on gross sales and/or receipts and other non-operating income.

According to Section 117 of OPT, the following shall pay a Common Carrier’s Tax (CCT) equivalent to three percent (3%) of their quarterly gross sales.

• Cars for rent or hire driven by the lessee for the transport of passengers;

• Transportation contractors, including persons who transport passengers for hire;

• Other domestic carriers by land for the transport of passengers;

• Keepers of garages – those who operate and maintain a shelter for automobiles.

Exempted form percentage tax are:

• Owner of Bancas (117)

• Owners of animal-drawn, two-wheeled vehicles (117)

According to Section 117 of OPT…

The gross sales of common carriers derived from their incoming and outgoing freight shall not be subject to local taxes imposed under the Local Government Code of 1991.

The following are the subject of taxation under Section 117 (OPT)

• Domestic common carriers by land for their transport of passengers.

• Keepers of garages

According to Section 118 of OPT…

International air carriers doing business in the Philippines on their gross sales derived from transport of cargo from the Philippines to another country shall pay a tax of three percent (3%) of their quarterly gross sales.

The following are subject to Common Carriers’ Tax (CCT) under Section 118

• International common carriers by air and sea for their transport of cargo.

• Originating port must be from the Philippines to another country.

The difference between the transport of passengers by international air or sea carriers doing business in the Philippines and the transport of passengers and cargo by domestic air or sea vessels from the Philippines

The former is VAT exempt as well as CCT exempt while the latter is subject to VAT under zero rate.

According to Section 119 of OPT, there is 3% tax on…

radio and/or television broadcasting companies whose annual gross sales of the preceding year does not exceed Ten million pesos (PhP10,000,000)

If the gross sales of the preceeding year (radio and/or television broadcasting companies) exceeds the ten million threshold, what is the appropriate treatment?

Business tax should be VAT

True or False: Not exceeding the 10M threshold of a radio and/or television broadcasting company can still elect to be VAT-registered, however, if opted for this option it is irrevocable.

TRUE

According to Section 119, tax rate on gas and water utilities is…

2%, based on the gross sales derived from the business covered by law granting the franchise.

According to Section 120 of OPT, there should be a 10% OCT on…

every overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, telewriter exchange, wireless and other communication equipment service.

What does OCT mean and its amount is billed on what?

Overseas Communication Tax is billed on the amount of the service.

Exceptions on OCT

• Government or any of its political subdivisions

• Diplomatic Services (embassy and consular offices of a foreign Government)

• International Organizations (public international organizations or its agencies based in the Philippines and is recognized pursuant to an international agreement)

• News Services

When must OCT be filed?

OCT shall be payable by the person paying for the services rendered and shall be paid to the person rendering the services who is required to collect and pay the tax within twenty (20) days after the end of each quarter

What type of tax should be derived from sources within the Philippines by all banks and non-bank financial intermediaries under Section 121 of OPT?

Gross Receipt Tax (GRT)

GRT is derived in accordance with the following schedule:

• On interest, commissions and discounts from lending activities as well as income from financial leasing, on the basis of remaining maturities of instruments from which such receipts are derived

• On dividends and equity shares and net income of subsidiaries (0%)

• On royalties, rentals of property, real or personal, profits, from exchange and all other items treated as gross income (7%)

• On net trading gains within the taxable year on foreign currency, debt securities, derivatives, and other similar financial instruments (7%)

The schedule of taxes on interest, commissions, and discounts are as follows:

• Maturity period is 5 years or less – 5%.

• Maturity period is more than 5 years or – 1%.

In cases when maturity period is shortened through pre-termination, how is the maturity period determined?

It is to end as of the date of pre-termination for purposes of classifying the transaction and the correct rate of tax

Which is more superior, general accounting principles or BSP?

Generally accounting principles as may be prescribed by the Bank Sentral ng Pilipinas shall likewise be the basis for calculation of gross receipts.

The basis of computation for GRT

Gross Receipts

According to Section 122 of OPT

Non-bank financial intermediaries, for purposes of percentage tax, have reference to persons or entities, other than banks, that are engaged in the lending, investing, or placement of funds or evidence of indebtedness or equity deposited with them, acquired by them or otherwise coursed through them, either for their own account or for the account of others

The tax on other non-bank financial intermediaries is…

5% based on gross receipts derived by other non-bank financial intermediaries doing business in the Philippines.

The 5% tax rate on the gross receipts is only applicable to:

Interest, commissions, and discounts from lending activities, as well as income from financial leasing, with maturity period is 5 year or less

If the maturity period is more than 5 years of the interest, commissions, and discounts from lending activities, as well as income from financial leasing, the tax rate is…

1%

Under Section 122,

Generally accounting principles as may be prescribed by the Securities and Exchange Commission

Under Section 123 of OPT, what is the general rule of taxes on life insurance premiums?

There shall be collected from every person, company or corporation doing life insurance business of any sort in the Philippines a tax of two percent (2%) of the total premium collected.

Exceptions under Section 123 of OPT: (PRIVE)

• On premiums refunded within 6 months after payment on account of rejection of risk or returned for other reason to a person insured (this should not be included in taxable receipts).

• Upon reinsurance by a company that has already paid the tax.

• On premiums collected or received by any branch of a domestic corporation, firm or association doing business outside the Philippines on account of any life insurance of the insured who is a nonresident, if any tax on such premium is imposed by the foreign country where the branch is established nor upon premiums collected or received on account of any reinsurance , if the insured, in case of personal insurance, resides outside the Philippines, if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected.

• On that portion of the premiums collected or received by the insurance companies on variable contracts (as defined in Section 232(2) of Presidential Decree No. 612), in excess of the amounts necessary to insure the lives of the variable contract workers.

• Exempted under this Section are purely cooperative companies or associations, which are those who are conducted by the members thereof with the money collected from among themselves and solely for their own protection and not for profit.

Under Section 124 of OPT, tax on agents of foreign insurance companies is at 4% if:

Every fire, marine or miscellaneous insurance agent authorized under the Insurance Code to procure policies of insurance as he may have previously been legally authorized to transact on risks located in the Philippines for companies not authorized to transact business in the Philippines shall pay a tax equal to twice the tax imposed in Section 123..

Where does Section 124 of OPT does not apply?

• Provision of this Section shall not apply to reinsurance.

• Provisions of this Section shall not affect the right of an owner of property to apply for and obtain for himself policies in foreign companies in cases where said owner does not make use of the services of any agent, company or corporation residing or doing business in the Philippines

When does the 5% tax percentage under Section 124 of OPT applies?

In all cases where owners of property obtain insurance directly with foreign companies, it shall be the duty of said owners to report to the Insurance Commissioner and to the Commissioner each case where insurance has been so effected and shall pay the tax of five percent (5%) on premiums paid, in the manner required by Section 123.

Under Section 125 of the OPT, the term gross receipts is defined as…

For the purpose of the Amusement Tax, the term ‘gross receipts’ embraces all the receipts of the proprietor, lessee or operator of the amusement place.

In the context of Section 125, gross receipts include:

income from television, radio and motion picture rights, if any.

There shall be collected from the proprietor, lessee or operator of the following, Amusement Tax as follows: (CC-BPJ)

• Eighteen percent (18%) in the case of cockpits.

• Eighteen percent (18%) in the case of cabarets, night or day clubs.

• Ten percent (10%) in the case of boxing exhibitions

• Fifteen percent (15%) in the case of professional basketball games as envisioned in Presidential Decree No. 871

• Thirty percent (30%) in the case of Jai-Alai and racetracks of their gross receipts, irrespective, of whether or not any amount is charged for admission

What is a night and day club?

Night and day clubs are drinking, dancing, and entertainment venues which oftentimes also serve food and provide entertainment

What are cabarets?

Cabarets, are restaurants or clubs where liquor and food are served, with a stage provided for performances by musicians, dancers, or comedians, including a venue for dancing by patrons/customers, similar to that of night clubs.

What are “other” amusement places?

Amusement places which offers the same pleasurable diversion entertainment and function includes videoke bars, karaoke bars, karaoke televisions, karaoke boxes and music lounges are also deemed to be subjected to the 18% amusement tax per RMC 18-2010.

Boxing exhibitions wherein World or Oriental Championships in any division is at stake shall be exempt from amusement tax, if: PH-Promo60

• At least one of the contenders for World or Oriental Championship is a citizen of the Philippines, and;

• The exhibitions are promoted by a citizen of the Philippines or by a corporation or association at least sixty percent (60%) of the capital of which is owned by such citizens

When is the deadline of filing of amusement taxes?

The taxes imposed herein shall be payable at the end of each quarter and it shall be the duty of the proprietor, lessee or operator concerned, as well as any party liable, within twenty (20) days after the end of each quarter

Section 125-A of the OPT, pertains to gaming tax that pertains to…

Any provision of existing laws, rules or regulations to the contrary notwithstanding, the entire gross gaming revenue or receipts or the agreed predetermined minimum monthly revenue or receipts from gaming, whichever is higher, shall be levied, assessed, and collected a Gaming Tax equivalent to (5%), in lieu of all other direct and indirect internal revenue taxes and local taxes, with respect to gaming income.

When should gaming tax be filed?

• The gaming tax shall be directly remitted to the Bureau of Internal Revenue not later than the 20th day following the end of each month:

• The Philippine Amusement and Gaming Corporation or any special economic zone authority or tourism zone authority or freeport authority may impose regulatory fees on offshore gaming licensees which shall not cumulatively exceed two percent (2%) of the gross gaming revenue or receipts derived from gaming operations and similar related activities of all offshore gaming licensees or a predetermined minimum guaranteed fee, whichever is higher.

Under Section 125-A of the OPT states that…

gross gaming revenue or receipts shall mean gross wages less payouts.

The taking of wagers made in the Philippines and the grave failure to cooperate with the third-party auditor shall result in the revocation of the license of the offshore gaming licensee.

• The Philippine Amusement and Gaming Corporation or any special economic zone authority or tourism zone authority or freeport authority shall engage the services of a third-party audit platform that would determine the gross gaming revenues or receipts of offshore gaming licensees.

• To ensure that the proper taxes and regulatory fees are levied, periodic reports about the results of the operation showing, among others, the gross gaming revenue or receipts of each offshore gaming licensee shall be submitted to the Bureau of Internal Revenue by the Philippine Amusement and Gaming Corporation or any special economic zone authority or tourism zone authority or freeport authority as certified by their thirdparty auditor.

Under Section 126 of the OPT, every person who wins in horse races shall pay a tax equivalent to…. WT-4-10

• ten percent (10%) of his Winnings or ‘dividends’, the tax to be based on the actual amount paid to him for every winning ticket after deducting the cost of the ticket.

• Provided, that in the case of winnings from double, forecast/quinella and trifecta bets, the tax shall be four percent (4%).

• In the case of owners of winning race horses, the tax shall be ten percent (10%) of the prizes.

The tax herein prescribed shall be…

deducted from the 'dividends' corresponding to each winning ticket or the 'prize' of each winning race horse owner and withheld by the operator, manager or person in charge of the horse races before paying the dividends or prizes to the persons entitled thereto.

Tax on winning should be filed on….

The operator, manager or person in charge of horse races shall, within twenty (20) days from the date the tax was deducted and withheld, file a true and correct return with the Commissioner in the manner or form to be prescribed by the Secretary of Finance, and pay within the same period the total amount of tax so deducted and withheld.

Tax on Sale, Barter or Exchange of Shares of Stock Listed and Traded through the Local Stock Exchange.

There shall be levied, assessed and collected on every sale, barter, exchange or other disposition of shares of stock listed and traded through the local stock exchange other than the sale by a dealer in securities, a tax at the rate of six-tenths of one percent (6⁄10 of 1%) of the gross selling price or gross value in money of the shares of stock sold, bartered, exchanged or otherwise disposed which shall be paid by the seller or transferor.

Every person subject to the percentage taxes imposed a quarterly return of the amount of the person's gross sales or earnings and pay, the tax due thereon within twenty-five (25) days after the end of each taxable quarter. EXCEPT

Exemption on this deadline: Section 120 (OCT), Section 125 (Amusement Tax), Section 126 (Tax on Winnings) – which should be 20 days after the end of each taxable quarter.

Under Section 116 of the OPT, who are required to file? 3GS: Small Sellers, Small Spaces

• Persons, who are not VAT-registered, who sell goods, properties or services, whose annual gross sales and/or receipts do not exceed three million pesos (Php3,000,000.00) and are exempt from value-added tax (VAT) (3% Gross Sales)

• Persons who lease residential units where the monthly rental per unit exceeds fifteen thousand pesos (Php15,000.00) but the aggregate of such rentals of the lessor during the year does not exceed three million pesos (Php3,000,000.00) (3% Gross Rentals)

Who are not required to file and pay Percentage Tax under Section 116?

Individual taxpayers (Purely self-employed/ professional and mixed income earner) who elects the 8% Gross Income Tax scheme

Persons engaged in the following industries/transactions are also required to file under OPT CIF-GO BANKS & BETS

• Cars for rent or hire driven by the lessee, transportation contractors, including persons who transport passengers for hire, and other domestic carriers by land for the transport of passengers (except owners of bancas and owners of animal-drawn two-wheeled vehicle) and keepers of garages

• International air/shipping carriers doing business in the Philippines on their gross receipts derived from transport of cargo from the Philippines to another country

• Franchise grantees of

  • Radio and/or television broadcasting companies whose annual gross receipts for the preceding year do not exceed Php 10,000,000.00 and did not opt to register as VAT taxpayers

  • Gas and water utilities

• Overseas dispatch, message or conversation transmitted from the Philippines by telephone, telegraph, tele-writer exchange, wireless and other communication equipment services

• Banks, non-bank financial intermediaries performing quasi-banking functions

• Other non-bank financial intermediaries (including pawnshops as clarified

• Person, company or corporation (except purely cooperative companies or associations) doing life insurance business in the Philippines

• Fire, marine or miscellaneous agents of foreign insurance companies

• Gross Receipts of proprietor, lessee or operator of (Amusement Tax):

  • Cockpits, cabarets, night or day clubs, including videoke bars, karaoke bars, karaoke televisions, karaoke boxes and music lounges

• Boxing exhibition

• Professional basketball games

• Jai-Alai and racetracks

• Offshore gaming licensees

• Winning or dividend in horse races

When to file and pay for OPT?

Within 25 days after the end of each taxable quarter, except in case of Amusement Tax and OCT, which shall be filed within 20 days after the end of each quarter

Who are required to file OP? BIS

• Every stock broker who effected a sale, barter or exchange of shares of stock listed and traded through the local stock exchange other than the sale by a dealer in securities, which tax shall be paid by the seller/transferor

• A corporate issuer, engaged in the sale, exchange or other disposition through Initial Public Offering (IPO) of shares of stock in closely-held corporations

• A stock broker who effected a sale, exchange or other disposition through secondary public offering of shares of stock in closely-held corporation

When to file/pay for OPT? 5-30-5

• For tax on sale of shares of stocks listed and traded through the local stock exchange (LSE) – within five (5) banking days from the date of collection

• For tax on shares of stocks sold or exchanged through primary offering - within 30 days from the date of listing in the LSE

• For tax on shares of stocks sold or exchanged through secondary public offering - within five (5) banking days from the date of collection